A federal bankruptcy judge turned the operations of Cannon Pictures Inc. over to an interim trustee, in part because one of the new controlling shareholders of the indie is a convicted felon.
After a 90-minute hearing Monday, Judge Lisa Hill Fenning granted an emergency request by eight creditors, including Charles Bronson’s production company, to appoint a trustee. Fenning, though, made the measure brief, agreeing to revisit the issue with another hearing in 10 days.
“I’ve heard very, very serious allegations here,” Fenning said. “I think the property is at risk.”
Sources said that John Hyde, the MCEG Sterling CEO who has been frequently appointed by the U.S. Trustee to run failing entertainment companies, would be appointed interim trustee at Cannon today.
Credit Lyonnais Bank Nederland, owed roughly $ 15 million by Cannon, and the Directors, Writers and Screen Actors Guilds, owed about $ 400,000, joined the creditors in seeking a trustee. Warner Bros. Home Video, owed roughly $ 10 million, had sought a less stringent remedy, seeking to turn control of Cannon over to a company officer and force him to report transactions to the court.
The creditors’ primary concern was that Gilbert Federbush, who owns 50% of the company that recently took control of Cannon, was convicted on six counts of mail and wire fraud in 1980 for establishing a bank that issued worthless checks. The creditors’ suit lists a handful of other businesses Federbush has been associated with that filed for bankruptcy protection or went into receivership.
Stephen Chrystie, the lawyer representing the creditors, said Federbush’s history suggests he would pilfer Cannon.
“It is a dead certainty that these assets will disappear when in the hands of a convicted felon, who makes a business of looting companies,” Chrystie said.
Those assets total roughly $ 80 million — including Cannon’s Wilshire Blvd. building and its film negatives, among other items. The company also has nine pix completed that could be distributed in the U.S. if the company gets a capital infusion.
For its part, Cannon said appointing a trustee, even for only 10 days, could devastate its business. The perception that the company needs an outsider to handle its affairs is enough to scare away possible business and certainly put a crimp in its ability to raise money.
“This precipitous action is going to ruin this company,” said Edward Coleman, Cannon’s lawyer. “It’s going to ruin any chances this company may have.”
And Coleman disputed charges that Federbush would plunder Cannon. Rather, he said, Federbush is the only person who is willing to pump money into the indie to restore its health.
“Mr. Federbush does not have his finger in the pot here,” Coleman said. “What he does have is the willingness to invest in this company to get it out of its financial glitch.”
‘Good faith efforts’
Through Jack Fiman, Cannon’s chief operating officer, Federbush said he is “willing to put forth any good faith efforts” to straighten out the legal snarl, including putting his stock in escrow and giving up the voting power that comes with it.